This is arguably the most crucial lesson for new investors to grasp regarding risk management.
- Focus: Emphasizing the importance of not putting all your money into a single asset or sector.
- Key points to cover:
- The concept of risk reduction by spreading investments.
- Practical ways to diversify (e.g., across different sectors, company sizes (large/mid/small cap), and asset classes like stocks, bonds, and mutual funds).
- The role of low-cost tools like Index Funds and ETFs (Exchange-Traded Funds) as simple ways for beginners to achieve instant diversification.
